"New leadership often emerging during corrections," says Richard Moroney in Dow Theory Forecasts, who highlights 6 relative strength blue chips.
The advisor explains, "Stocks have retreated sharply and broadly, reflecting concerns that turmoil in the corporate-junk-bond and mortgage-debt markets will spill over to the broader economy – and perhaps halt the boom in takeovers."
Near-term volatility seems likely, he suggests, and a pullback to 12,700 to 13,350 on the Dow Industrials would be consistent with a secondary correction in an ongoing bull market. While holding some cash on the sidelines seems prudent, he advises, his recommended cash position remains at 5% to 10%.
Looking to find the stocks that will qualify as "new leadership" for after this correction, he notes, "A stock's ability to outperform during such pullbacks is a bullish indicator."
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